Ferrari - Earnings Call - Q3 2025

Transcript

Speaker 0

Good day, and thank you for standing by. Welcome to the Ferrari Q3 twenty twenty five Results Conference Call and Webcast. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. A Please note that today's conference is being recorded.

I would now like to turn the conference over to your speaker, Nicoletta Russo, Head of Investor Relations. Please go ahead.

Speaker 1

Thank you, Raja, and welcome to everyone who's joining us. Today, we plan to cover the group's third quarter twenty twenty five operating results, Before we begin, let me remind you that any forward looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor statements included on Page two of today's presentation, and the call will be covered by this language. With that said, I would like to turn the call over to Benedicto.

Speaker 2

The eight forty nine Testarossa family, the first step of the build of the Ferrari Electrica and the Capital Markets Day. Let's start from the Capital Market Day. On October 9, in Barabello, we gathered together and we shared our ambitions and plans for the future with investors, journalists and the entire world. In this current uncertain world, we shared an ambitious financial floor from end of this decade: €9,000,000,000 of revenues, 40% EBITDA margin and 30% EBIT margin. What did we say at Capital Market Day exactly?

Two things: We highlighted that Ferrari is a unique company, which combines three dimensions: heritage, technology and racing. It has a dual identity, both inclusive and exclusive, capable to engage with Tifosi, realistic and brand large across generation and geographies. We have set ambitious ambitions for each show with unwavering goal to keep our brand strong for the longer term, well beyond 2030. In racing, we aim to win. We want to continue to be successful in endurance and come back to victory in Formula One.

We owe this to our people, to fuel their passion and the inclusive side of our brand. In Sportcast, we continue to focus on managing and crafting the exclusivity of our product through an orthodontic product diversification strategy, which ensures custody per each single model. We confirm our innovation pace. We will continue to offer our clients an average of four new models per year between '26 and 2030 across the three different powertrains: ICE, hybrid and direct rate, to address different clients' and different clients' needs. In 2022, we told you that the 2030 breakdown of powertrain offering would have been 20% ICE, 40% hybrid and 40% direct.

Our plans were based on the environment in 2022 and our expectation about its evolution. Today, in 2025, we have deliberately recalibrated our powertrain offer to be 40% IC, 40% hybrid and 20% electric. Why did we decide this? Two are the main reasons. One, market dynamics.

We have always believed in electrification as an addition, not as a transition. Overall market adoption of electric technology has been more gradual than anticipated in 2022. At the same time, demand for thermal and hybrid models has been more sustained. Two, client centricity. We put our clients always at the center of what we do.

We are very flexible and agile to adapt our product plans to the evolving environment, developing and offering models that best address our client needs and meet their preferences. Regardless of the powertrain, we will keep on harnessing each technology in a unique and distinctive way, enhancing the driving emotions and staying true to our belief that we have to be innovative, adapting to the changing times. That is what our founder did since 1947 when It's our responsibility. It's our responsibility to keep alive this will to progress. This technology notaric approach is something we have chosen, we have planned for and invested in, also from an infrastructure point of view.

The E Building, our new facility in Maranello, capable to manufacture the three powertrains, is the perfect example of this flexible approach. Our research and development efforts will not only focus on powertrain performance, but also on vehicle dynamics, experience on board and the new materials, all of which make our product unique. Moving to clients, we will continue to grow our Ferrari family, which today counts 90,000 active clients, and to foster their sense of belonging in community through an ecosystem of unique experiences from track to road to brand. Lastly, lifestyle. This is the soul that is instrumental to enrich the client experience and to widen our audience beyond our deposit and perilousness.

I personally believe the team did a great job in bringing brand consistency. We then translated everything I just said with the help of Antonio. And let me underline and let me try a couple of elements. One, we continue to grow our business to new heights in an organic and consistent way. We look at the 2,030 target as a floor of our ambitions, always acting in the long term interest of our brand, safeguarding exclusivity above all.

The macroeconomic environment remains uncertain and extremely volatile. However, the visibility and solidity of our business model allowed us to commit to an ambitious plan of six years of growth, which we will execute with focus and discipline as we did for the previous one. We will continue to deliver on our promises. And then we concluded the Capital Market Day with our renewed decarbonization commitment. We have already achieved approximately 30% reduction in our Scope one and Scope two ambitions and approximately 10% reduction per car in Scope three, the emission in 2024 versus 2021.

We will capitalize on this achievement with the clear target to reduce our Scope one and Scope two emission by 10x in 2030 versus 'twenty one and to decrease by 25% the absolute Scope three emission in 2030 versus the past year 2024. Moreover, the day before the Capital Markets Day, we unveiled the technology hub of our Ferrari electric car. This represents the first step of the reveal, which will be followed by the look and feel of interior design concept in Q1 twenty twenty six and the complete cut in Q2 twenty twenty six. As a leader, Ferrari as a leader takes its innovation responsibility very seriously. The Ferrari Electrica is a new opportunity to reaffirm our will to progress, as it has happened many times in the past with the introduction of innovative concepts, such as with turbo engines, hybrid powertrain and most recently with the Porosanue, there is great anticipation to experience the driving emotion of the After the Capital Market Day, I met several clients in USA, in Korea, in China and in Italy.

And all of them appreciated the way we present the model. This is what they told me. Electric cars are generally heavy as elephants and not fun to drive. You did well to invest in active electronic systems to transform the elephant in a horse and to engage the drivers with pedal shift like in all Ferrari. We are looking forward to driving it.

We can continue to be innovative if we keep the pace of change. And having the three powertrains in our portfolio is a clear advantage, especially in front of younger generations. With the first step of the review of the Ferrari Electrica and our mailing in September of the August PESTRA ROSA, CUBE and SPIRES, we have concluded the six launches we had announced one year ago for the entire twenty five. I met many clients in Europe, in USA and in China who are in love with Testarossa. Last week in China, I met a young female client, younger than 40 years old, and she told me, Testarossa is the perfect harmonious blend of design and engineering, elegance and craftsmanship, and eager to own one and drive it.

In the past few months, almost all Range models in production were substantially sold out. The launches of the Testarossa factory and the Mafe and their great traction in bank clients are initially contributing to the order intake. Indeed, the order book extends well into 2027. Over the next few quarters, we will have a significant changeover of models. Indeed, in January 25, only 15% of our lineup was in ramp up phase of production, while we will close the year with 35% of the lineup in ramp up phase, and this is a result of all the activities of development that we did in the past years.

Moving to the quarters, Q3 twenty five saw continued growth. Just a few key numbers to highlight. One, total revenues reached approximately €1,800,000,000 a 7.4% growth year over year with flat deliveries two, strong profitability with EBIT of over €500,000,000 and last but not the least, Industrial free cash flow at €365,000,000 These are solid business performance. This solid business performance allowed us to revise upward the 25% guidance during the Capital Market Day in October. Our revised guidance exceeds the profitability target we had originally set for 26% in the previous business plan, one year in advance.

Moreover, the decision to complete the current share repurchase program within these years, once again one year earlier than planned, also reflects such progress and strong confidence that we have in the future. And now I will leave the stage to Antonio to explain the quarter in more depth.

Speaker 3

Good afternoon, Hector, and good morning or afternoon to everyone joining us today. Starting on Page four, we provide the highlights of the third quarter, which once again delivered consistent growth and demonstrates solid progress. Product mix and personalization, along with raising revenues, were the main drivers of revenue and profitability growth, with shipments in line with the previous year. This resulted in a strong industrial free cash flow generation in the period. Let me underline that such results were accomplished notwithstanding the impact of the incremental U.

S. Import tariffs, which became visible in Q3, a greater foreign exchange rate headwind and lower deliveries of the Daytona SP3, which was phased out in the quarter. On Page five, we did dive into our shipments. They were driven by the February GTS, the Burosangue, the Dodys Chirindo family, which continued its ramp up phase and the Ramafighter. The s f 90 XF heavy increased its contribution.

The 2.6 GdB decreased approaching the end of the trial cycle, and the s f 90 spider phased out. Deliveries of the Daytona ST-three were lower than the prior year and concluded their limited series run. As anticipated by Deredetto, in the quarter, we started a significant changeover of models, which will be also visible in the next quarter. The SF90 family and the ROMA were already phased out, and the two ninety six family is approaching the end of its life cycle. Indeed, those models will be progressively replaced starting from next year by the August Sessarosa family, the Amalfi, and the two ninety six special series, respectively, a record number of new models introduced at the same time.

On Page six, the net revenue bridge shows a 9.3% growth versus the prior year at constant currency. This translating to a 7.4% growth, including the headwind from currency, mainly related to the U. S. Dollar dynamics. The increase in cars and spare parts was driven by the richer product mix as well as higher personalizations despite the lower deliveries of Daytona SP3, which followed our plan.

Personalizations accounted for approximately 20% of total revenues from cars and spare parts and were particularly relevant for the U-ninety XS family and the Guro Sangue, also supported by the adoption of carbon and special paint. Sponsorship, commercial and brand also increased, thanks to higher sponsorships and the improved performance of the lifestyle activities as well as higher commercial revenues linked to the better prior year Formula one ranking. Moving to Page seven. The change in EBIT is explained by the following variances. Mix and price was positive, thanks to the enriched product mix.

Indeed, despite the phaseout of the Daytona SP3, the product mix was sustained by the higher end of our product offering, namely ESF90xx and the Itolichi Shing Refinery. The mix was also supported by the increased contribution from customer relations. Please note that the impact from incremental U. S. Import tariffs as well as from the update of our commercial policy in response are included in the mix and price variance.

This resulted in a margin dilution at constant currency, particularly visible in the third quarter since the majority of our shipments in The United States was represented by models whose price were protected under the updated policy. Industrial cost and G and A were lower year over year, in line with model life cycles, partially offset by higher development costs for racing. SG and A were also higher, reflecting racing expenses and brand investment. Other was positive, mainly thanks to racing and lifestyle activities. Percentage margins continued to be strong in the quarter despite the dilution from increased import duties, with EBITDA margin at 37.9% and EBIT margin at 28.4%.

Turning to Page eight. Our industrial free cash flow generation for the quarter was strong at €365,000,000 and reflected the increase in profitability, partially offset by capital expenditures, which were mainly focused on product development and the progress in the new bench of construction and the negative change in working capital, provisions and others, mainly due to the reversal of the advances collected in the previous quarters. Net interest debt was EUR 116,000,000 at the September, also reflecting the share repurchase program executed in the quarter, which is approaching its completion by year end, as reminded by Benedetto, one year in advance compared to our plan as announced in June 2022. Moving to Page nine. We confirm our 2025 guidance, which was revised upwards during the Capital Markets Day on October 9 on the back of the soy business performance and reflecting improved SportCar revenues, including personalization, a lighter than expected cost base despite a greater headwind from foreign exchange rate and increased used tariffs.

And with this in mind, for Q4, we project lower deliveries year over year, as we already told you in the second quarter call, and this is in connection with the changeover of models that I mentioned earlier on. A positive product mix, although sequentially brighter, in line with the phase out of the Daytona and the first unit of the FETi higher G and A and a seasonal step up in raising R and D expenses as well as higher G and A dictated by the start of productions of new models. Looking at 2026 and beyond, let me remind you that the introduction of the F80 will be gradual. As usual, it will take a couple of quarters to ramp up the production, and the life cycle is expected to be around three years. The guidance of the F80 and the model changeovers will imply a more back end loaded 2026, and we will shape the product and company mix throughout the year.

Such developments are consistent with our plan to deliver in the years to come as moved and as linear as possible expansion of our profitability in absolute terms. Be assured that we continue to execute on this plan with discipline and focus, and today's strong results provide once again the evidence of our continued commitment. Thanks for your attention, and I turn the call over to Nicoletta.

Speaker 1

Thank you, Antonio. And Andrea, we are now ready to take further questions, sir. Please go ahead.

Speaker 0

Thank We are now going to proceed with our first question. And the questions come from the line of Michael Binetti from Evercore ISI. Please ask your question.

Speaker 4

Hey guys, thanks for taking our question here. Just a couple for me. Antonio, I think you're saying that the mix impact in the second half will be a little bit better than what you anticipated. I saw that mix added about $25,000,000 in the quarter. I think last call you said mix would be neutral for the second half.

So can you just help us think what's driving a little bit of that upside and maybe how much we can think about in fourth quarter from mix relative to the third quarter? And then I guess just as we think about the personalization comments you made about 20% now, you guided to personalization being closer to 19% longer term. It's a little counterintuitive to us with the new Taylor Made studios and the paint shop coming online next year. Maybe just walk us through what drives the moderation there?

Speaker 3

Yes. No doubt. Thank you, Michael. On the first question, yes, the mix in the Can

Speaker 2

you hear well, Michael?

Speaker 3

I'm sorry, what was that, Henrietta?

Speaker 2

I was saying, can you hear well?

Speaker 4

Not very well, no.

Speaker 2

That's the reason why I asked you because we understood that someone was not able to listen, but we hear well. I don't know if this is right. Okay.

Speaker 3

I'll try to answer. I hope you can hear me. Yes. The mix impact in the second half of the year has been slightly better than anticipated. So I remember I answered you in the second quarter call that you would have expected the mix more neutral in the second half.

Now this is a a slight improvement, at least based on the on the third quarter results, and this is mainly due to personalization that remain very, very strong. With respect to your second quarter second question, we said we have prepared the plan on the basis of a 19% longer term penetration of personalization. In this respect, the contribution of tailor made and and particularly the tailor made center, bear in mind that they're being taken into consideration mostly to come closer to our client. So the the overall consideration on the penetration of personalization takes that into account with a view to be close to our client also in countries where such tailor made personalization are particularly relevant, such as Japan and the Western Coast Of USA.

Speaker 5

Okay. And

Speaker 4

is can I just ask you one clarifying comment? You said the F-eighty will roll out over three years. Is that am I wrong or is that a little longer than the normal cadence for one of the strictly limited or supercar models like this? Is that and is there a strategy behind stretching that out a little longer? I would think normally, it would you'd see the bulk of those shipments in maybe eight or

Speaker 3

ten quarters. Much line with what we've been doing on the ICON as recently considering the overall number of cars involved and the start up phase that is in date by in order to get to run rate of production.

Speaker 4

Okay. Thanks, guys. I appreciate

Speaker 3

it. Thank

Speaker 0

you. We are now going to proceed with our next question. And the next questions come from the line of Steven Reitman from Bernstein. Please ask your question. Hello, Steven, your line is open.

You may ask your question. Hello, Steven Ritman. Can you hear us? Your phone might be on mute. Your line is open if you may ask a question.

Okay. It looks like we've the personnel just disconnected. We are now going to proceed with our next question. And the next question comes from the line of Flavio Chirada from GAM. Please ask your question.

Speaker 6

Yes. Hi, Bernadette, Tony, good afternoon. So my question is I'm taking you back to the Capital Markets Day and your projections of top line growth to 2030. So a very simple question, volume price mix, volume you guys control it, mix to a point. And I was just wondering on price, your pricing power, given all that's been done and the great results that we've seen in recent years, Bernadette, where do you think you stand on this?

Do you think you're coming to an end here? Or do you think there's more to come?

Speaker 2

Thank you, Pradeep, for the question. It's not at all at an end. Actually, we feel confident that with all the innovation that we have to delight our clients, we do not see any weakening in our pricing power. We will continue to offer Plavio, car with a different positioning. All of them will benefit of the pricing power because this pricing power, just to be clear, is not coming because we will just increase the price for the same, let me say, product as it is.

No. We will make richer and richer and innovative, more and more innovative in the product so that by delighting the client, we are confident that we will keep our pricing power. And this is what we are working on, and this is the goal of all the money that we invest in R and D, in innovation with all the team here.

Speaker 6

So aligned to more models, fewer volumes?

Speaker 2

Yes.

Speaker 0

Thank you. We are now going to proceed with our next question. And the questions come from the line of Thomas Bessel from Kepler Cheuvreux. Please ask your question.

Speaker 7

Thank you very much. I have two questions, First, on hybrids, I think the share was lost in a couple of years. Is it linked with the changeover of product? Or is it driven by willingness to reduce overall hybrid share to eventually address excess deliveries in certain markets and residual values. But for the first question and the second, could you give us the delivery figures, please, for the Q3 data now and what how many F80 you're already going to launch in Q4, please?

Speaker 2

Okay. So the first one, Thomas, is just is the depends on the offer that we have on the lineup we are offering to our clients. The number of hybrid cars that we are offering is is reducing because there is a change in the model. So there is no if you want, there is no surprise over there. It's a consequence of the way we launched the the car.

No. That's it. There is a don't don't extrapolate any trend over there. Okay? And it's not related to to the propulsion.

The second is how many FAT you're planning to launch to sell

Speaker 3

in Q1? Just the initial few units, Tla, notice number. And I thought I am 40 in the in the third quarter.

Speaker 0

And the next questions come from the line of Steven Rubin from Bernstein. Please ask your question. Your line is open.

Speaker 8

Yes. Good afternoon. Apologies. I had a problem with connection. And I apologize also if the question has been asked before because I was cut off, so I answered it redialing again.

So thank you for your comments about contribution of the eight forty nine extending the coverage of your order book into 2027. I'd like to know if demand is similar for both the COOP and for the SPYDER. And I know you don't comment on the order intake on a model by model basis, but could you talk about the level of interest you're seeing in the Amalfi? Is demand strong for the entry products as it is for your higher end products? And my second question is regarding also on the hybrids.

You've given us some detail in the past about the penetration rates you're seeing for your extended warranty program for the battery program and the like. And I think the last figure we have was running at about 15% to 20%. Obviously, that's a very good way of improving the residual values of these vehicles and making these a Ferrari's last being guard lost forever as is your intention. So could you update us on where you are with that program? How well is it understood?

Thank you.

Speaker 2

Thank you, Stephen. And I understand that electronics is not always working well before. That is why we manage carefully electronics in our cars. Having said that, how is going the MRT? I think Amazfit is proceeding better than the previous model.

So this is very is very encouraging. The second point I can tell you is that I I saw I was in China the October 21, and I saw the first two sold over there to the new client, the youngest, then 40 years old. I can also share with you that in order book, more than 50% of the new client of the sorry. 40% of the people that want to buy the Amalfi are coming new to the brand. And this is let's say, we are pleased because one of the objectives of this car was to bring onboard that new to the brand.

So that's the comment on Amalfi. The story of hybrid, the hybrid warranty, I think that I mean, it's picking up, continues to pick up. It's more than 20%. But we see one simple thing. We have dealers that are able to explain it well, while we still see some dealers that have not yet explained it properly.

So we are in the process to retrain some of our dealers because some of them are not able to explain properly the advantage of this warranty scheme. So we see improvement, but I think there is more if the older dealers are able to explain properly. So that's what I

Speaker 3

think what we said.

Speaker 2

Thank you, Stephen.

Speaker 8

Thank you.

Speaker 0

Thank you. We are now going to proceed with our next question. And the questions come from the line of Thomas Besson from Kepler Cheuvreux. Please ask your question.

Speaker 7

Thank you. I think I've already asked my question. So I think you can pass on to the next speaker.

Speaker 2

In fact, I was surprised.

Speaker 7

Yes, me too. You. We

Speaker 0

are now going to proceed with our next question. And the next questions come from the line of Robert Kraszkowski from UBS. Just

Speaker 9

two questions for me, please. And just maybe starting with the Q3, like I think we were expecting that it's going to be the weakest quarter in the year. So obviously, something went better and maybe we heard that it was personalization, but maybe if you could talk specific about The U. S. Back in Q2, you mentioned that there is some change in consumer behavior because of the tariffs.

Have you seen it normalizing right now after we have more clarity on tariffs? And maybe the second one also related to The U. S. Obviously, there is a lot of conversation about residuals, and there is some kind of concern about potential increase in order cancellations. Have you seen any unusual or any pickup in orders cancellation in The U.

S. As consumers are a bit worried about potential change in residual values in the market?

Speaker 2

I'll take this question, Robert. So one, in U. S, the business proceeds as usual, number one. Number two, the only difference we see in U. S.

That if you compare today versus the previous call, at that time, the tariffs were still at 25%. Now they are at 15%. Now it's carved out in the stone. It's 15%. So that's the only difference we see.

And we have been you remember last time, we told you when it will become, how can I say, blessed by papers, then we will update the commercial policy? And that's what we did. That's what we did before. We said the price increase up to 10% when the tariffs were 25%. And now we say price increase up to 5%.

That's the only difference in U. S. Then the business is proceeds as usual.

Speaker 3

And with respect to Q3 being originally thought as the weakest quarter in the year, I think the reason is very simple. We were the level of personalization was higher than we were we were expecting. So that has on the top line. And in terms of the cost basis, a point that I highlighted when we revised the guidance upward, the cost base actually ended up being lower compared to our initial expectations.

Speaker 0

Thank you. We are now going to proceed with our next question. And the questions come from the line of Tom Narayan from RBC. Please ask your question.

Speaker 10

Hey, thanks for taking the questions. My first one, Antonio, I think I didn't hear it and you said it, but could you please review the bridge again from Q3 to Q4? I know the Daytonas are zeroed out, but then maybe review the maybe the R and D and SG and A? And then I

Speaker 8

have a follow-up.

Speaker 3

Yes. With respect to Q4, Tom, I said that the there will be lower deliveries year over year. That's the point that we already anticipate in the Q2 call. This is to be right in connection with the changeover of models that

Speaker 8

we

Speaker 3

discussed. Then I said there will be a positive product mix, although we expect it sequentially lighter, in line with the phase out of the Daytona and the first unit of the F80. And the last point is that we expect higher G and A and a seasonal step up in raising expenses for development of the applications for the for the car as well as higher D and A that are dictated by the start of production of the new models.

Speaker 10

Got it. Okay. That's very helpful. And then I have a kind of high level question. I think in the past you've said that when there's a new kind of form factor like Purosangue was a very different vehicle than you had ever made in the past that initially obviously there is a, I don't know, like a margin headwind relative to if it was a standard product that you've done before at the same price point, how do we think about the Electrica from this standpoint given that it's a completely different form factor?

Is it safe to say that there's a similar kind of margin headwind relative to models that you make at a much larger volume requiring less incremental new spend. Is that is that is that a safe assumption to make? Thanks.

Speaker 2

I think, Tom, you have good memory. That's what we said about Sangre. But we said it when everything was announced and everything was satisfied. So I don't want to look like I'm polite. But if you are patient a little bit, then we will be more precise on that.

Speaker 11

Got it. Okay.

Speaker 2

But before I sign, like, you remember, we told you everything when the shape was visible and not only the shape was

Speaker 3

visible. Understood.

Speaker 10

Thank you.

Speaker 0

Thank you. We are now going to proceed with our next question. And the questions come from the line of James Kryznik from Jefferies International. Please ask your question.

Speaker 11

Yes. Good morning, Joe, Benelis, Antonio and team. I guess I have really a philosophical question for Benedicto, just to follow-up on Flavio's. I think, Benedicto, you've made it very clear that you expect a higher rate of innovation to continue to really support your pricing power for the brand. But when I consider your 2,030 plan, you seem to assume that, that lever, that pricemix lever is going to be much less important than in the past.

Is that should we be thinking that the rate of innovation in the next five years reduces to go hand in hand with that pricemix lever being less important than in the past four years? Thank you.

Speaker 2

No. I think that innovation rate does not slow down, honestly. I think we have several innovation in the pocket that we plan to apply to the different cars, each one for its own positioning. And I mean, we if we would sit on innovation, I don't think we would be calling Ferrari. So the reason why I was very clear with the question the answer to the question of Flavio and Chirena is because we have several levers of innovation that go beyond the traction.

There is the vehicle dynamics. Is the user interface. There is architecture. There is the driving trails that we feel confident that once we apply this to the different model, we will be able to delight the client and thus to use properly the pricing power. Because we are not I would like to maybe underline one point.

We are not a company that is increasing the price of the same object just because times goes on. No. We increase the price of what we do because we put something more innovative in it and because this innovation is gonna delight our clients. I think this is important. If you see also the way we increased the price in the past years, well, Ferrari has been unique in the sense that we have not increased the price of the same object, but we have put innovation in the product and done because of high degree of innovation, high degree of delightment of the client, we exerted properly the pricing power.

That is big, and that's gonna be in this way. James?

Speaker 11

That's very clear. That's it.

Speaker 2

Thank you.

Speaker 0

You. We are now going to proceed with our next question. And the questions come from the line of Jose Asumendi from JPMorgan. Please ask your question.

Speaker 5

Thank you very much. Thank you, Veneto. Just one question, please. I guess, shouldn't you ask the question after the Capital Markets Day with regards to, I think, very exciting future, I think, bright products that you're launching to the market. But they also require some investments, such as the launch of the electric car.

I think some necessary investments like the paint shop. I know I think all the best facilities we saw during the Capital Markets Day. The question is to create a stability of margins in the business model, how can we think about the offsetting elements, the the positive contributions you're gonna have in the medium term to create that margin stability? And there might be some doubts in the market about the margin stability of the business model. How can we think about that balance between investments and then the opportunities you have to maintain and create that margin stability that you showed nothing in the past years?

Thank you.

Speaker 2

Let me see because there was some noise just to make sure that I understood properly, Jose. I think that if you want this this question for me, the answer is the way it goes to the previous one. The the only way or first of all, we are living in a certain time. Yes. There is no difference also if you want many other cases in the history.

Now the only things we can do is to make sure that we keep innovating so to offer something that is unique to our client, unique in the performance, in engineering, unique in the design, unique in the way we do it. Because, you know, why why are we doing the paint shop? Why are we doing the why did we do the ebuilding? Because we want to be unique in the way we manufacture our cars, whatever they are, ICE, hybrid and green, electric. Why we are showing in a multistep way the innovation of electric car.

Because we want to make sure that all the work done by the engineers, well, it's not gonna be lost. Because there are so many new things in this car as well as in other cars that we will make sure that innovation is properly is properly explained to our client. We noticed it let's put it this way. We noticed that for some car in the past, there was a lot of innovation content or there were several innovation content that were not properly explained. And this is an area of improvement we have.

When we do something new, either on technology, on design, on engineering, we have the responsibility to explain well to the world. Because behind that beyond that, there is the work of many people, blue collar and white collars. So this is, you know, the the philosophical question or the the goal of this question of of this company is to make sure that on the innovation side, whatever we do is unique. And this is, if you want, the best guarantee of the long term sustainability of what we do. That's it.

I mean, only if you are unique, you know, we can do something that guarantees the long term sustainability. That's the reason why we gave you a floor for the end of this decade, and we feel confident for that because of the uniqueness of what we do.

Speaker 0

And the questions come from the line of Michael Tindall from HSBC. Please ask your question.

Speaker 12

Yes. Good afternoon. Thank you very much. Two questions, if I can. One for Antonio.

Can we talk about the F1 budget for next year? So headline number, if I'm not wrong, is USD215 million from current 135,000,000 From where you're sitting, is that just an incremental $80,000,000 of cost? Or does the scope change mean that actually the impact on your P and L is considerably lower than that headline number? And then the second one is just around, can you talk a bit about FX on the order backlog? What scope do you have?

And how much do you really want to push in terms of trying to offset what's going on with currencies on a backlog that now runs into 2027? Thanks.

Speaker 3

Thanks, Michael. The first one, we really need a fuel cost increase. That's an element we need to take into account. So if the F1 budget grows, this is closing to our cost, and this is to be taken as a cost increase. On effect on the order backlog, based on the agreement that we have with dealers, in principle, we could change pricing with a ninety days anticipation, guess.

So it's something that we think is We decide on a country by country basis and depending also on the movement in terms of the exchange rate on the size of the move.

Speaker 12

It. Got it. Thank you.

Speaker 3

Welcome.

Speaker 0

Thank you. Given the time constraint, this concludes the question and answer session. I will now hand back to Benedicto Vigna, CEO, for closing remarks.

Speaker 2

Thanks for your time today and also for all your interesting questions. Thanks a lot. We remain focused on executing our plans throughout the rest of these years. And also, with confidence, we begin to build the next phase of our new business plan. It's a business plan.

It is ambitious, and we are highly confident that this is going to happen. We'll deliver on our promises as we already did so far. And this after this, I wish you a good morning or afternoon, and I thank you again for your attention and your questions.

Speaker 0

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a good rest of your day.